Pizza Night

Friday nights are reserved for family pizza night.  Although no startup exec is too surprised when business intrudes on a family ritual, none of us could have expected the matter of emergency services response times would come crashing—quite literally—into our Friday night.

…Interruptus

At 8:46pm last night¹, we heard a horrible-sounding car crash right outside our house.  At my day job (more about it in a minute), we work with police and emergency services every day, and so not one but two thoughts immediately flashed through my head:  1) thank God my family is safe; and 2) I know what to do now:  call 9-1-1; they don’t know about this yet; give them as much information as possible.  (Fortunately, I had already done the most important thing:  made sure my address was visible from the street as soon as we moved in.)  And so began my personal saga of trying to get useful information to someone who could help—and learning, at a personal level, why what we do every day at ShotSpotter matters:

False Start: 20:46:10?-20:48:35 (seconds 0000-0125)

Within 60 seconds, I find  our home phone and dial 9-1-1.  It’s a Vonage line, and I am unpleasantly surprised to be connected to San Francisco 9-1-1.  We live in San Mateo County, and I quickly realize that I must have neglected to update the 9-1-1 street address information for the account.  (Yes, Vonage doesn’t know where to send your 9-1-1 call unless you tell them.  Not their fault;  this is why Next Generation 9-1-1 is so important.)  Now I have to spend 55 seconds convincing the operator that there was an emergency, but I am in another county from her, that I had been mistakenly connected to her, and therefore that she shouldn’t do what 9-1-1 protocol calls for her to do if I just hang up:  1) call me back if I hang up and escalate the call as non-responsive, or 2) worse yet, send help to our old address in San Francisco, where we don’t live any longer.  Mission accomplished, but 125 seconds wasted.

How May I Direct Your Call? 20:49:00-20:51:30 (seconds 0170-0320)

So now I’ve got to find another way to call.  Option #1: call local emergency number posted on refrigerator.  (You do have your local police switchboard on your refrigerator, right?)  Too far.  I’m upstairs, time counts.  Option #2: use my mobile phone.  Fortunately, thanks to E9-1-1, calls from mobile phones usually go to the correct local PSAP (that’s Public Safety Answering Point), not to the California Highway Patrol, as they used to.  I’m connected and immediately confronted with a question:  ”What is the nature of your emergency?  Police, Fire or Medical?”  Hmmmm, car crash.  I’m thinking Medical.  But most fire departments deliver EMT services these days.  So is it Fire?  Eventually the Police will have to show up.  I wonder if it’s Police?  No, it’s Medical.  ”Medical,” I say.  ”OK, just a minute, sir.”  I’m on hold for what feels like hours, but is really about 45 seconds.

Critical Information: 20:51:30-20:54:12 (seconds 0170-0482)

“Please state the nature of your emergency.”  ”There’s been a car crash,” I reply.”  ”OK, are you hurt?”  ”No, it happened outside my house.  I’m trying to help.” “What is your address?  [I answer.]  OK, help is on the way, and I need to ask you some additional questions.”  I check the time at this very moment:  324 seconds havepassed—5 minutes, 24 seconds.  That’s how long it took me to get the word to people who could help that somebody needed help.  And I was clear-thinking and organized, because I wasn’t involved.  Maybe I knew a bit more of what to say because I work in the field.  Maybe.  If I had been a victim, adrenalin racing through my system and clouding my judgment, trying to figure out where I was, what precise address I had stopped at (or what road I was on, for that matter!)—who knows how much longer it would have been?

Keep Gathering Information: 20:54:13-20:59:17 (seconds 0483-0787)

Can you see anybody?”  ”Not yet, I’ve got to get a flashlight.”  And so ensued another 6 minutes of the 9-1-1 operator talking to me, instructing the victims through me, and getting information he needed.  Was anyone trapped in the car? (No.)  Was anyone ejected from the vehicle?  (No.)  Was anyone bleeding? (Yes.)  Were the victims young?  (Yes, under 18 and trying to get me not to call the police)  Was there obvious alcohol? (No.)

21:00 Help Arrives (seconds 0788+)

The cavalry arrives.  Two fire trucks and the Central County Fire chief, police, ambulance.  The neighbors disperse back to their homes to bring their families up to speed on what happened.  The professionals take over.  The kids are taken to local hospitals.  The car is removed.   Someone sweeps up the debris.  Nighttime quiet returns.

11 Minutes Matter

Which brings me to response times.  The Burlingame and San Mateo County emergency responders did their jobs perfectly:  they arrived quickly (roughly 6 minutes from my giving the address;  maybe 8 minutes if one of my neighbors had also called and not had my Vonage-related false start), to the correct location, and rendered aid.  But through no fault of their own, first responders were completely dependent on me and my neighbors to get them to the right place.  We live in a quiet neighborhood where such incidents are uncommon.  When they do happen, we all call.

My Day Job

Whereas accidents can (and do) happen anywhere, others live in neighborhoods where, sadly, violent crimes also put lives at risk—and do so every day.  At ShotSpotter, we deal with one particular kind of violent crime:  gun violence.  Literally every evening, our systems detect between a hundred or more shootings nationwide.  And therefore a hundred or more times a night, ShotSpotter delivers information similar to what it took me 5 minutes and 24 seconds to deliver over the phone automatically to police—about 150 times faster than I was able to.  Unfortunately, if you live in a neighborhood where you hear gunshots every night, you’re also not as likely to call the police every time as if you hear it once a year.  ”It happens every night; the police already know!” That’s why studies show 9-1-1 receives a call less than 25% of the time a gun is fired.  And as you can see from my experience last night why, even when they do receive a call, 9-1-1 finds out anywhere from 3 to 8 minutes after the event.  (And bear in mind that in the 25% of cases in which people do call 9-1-1 about gunfire, they don’t know where the gunfire took place; they know where they live!  So that adds time to the response too, as police don’t know precisely where to go.)

When lives are at stake, seconds matter.  (See USA Today’s “The price of just a few seconds lost: People die”, for example)

So I’ll go to work on Tuesday knowing that our product helps make communities safer, if not from an unfortunate car crash which thankfully caused no serious injuries,  then from the hundreds of gunfire incidents we help pinpoint for police so they can arrive to exactly the right place, minutes earlier than they otherwise could, hopefully in time to save a life, perhaps take a gun off the street, and in time to send a message to the community that while car accidents may happen, gun violence doesn’t have to.

1. I have accurate elapsed times in this post for everything thanks to the phone logs on my mobile and Vonage phones, except for the first 30-45 seconds which it took me to go from our family room to pick up the phone [↩]

I seem to have a habit of experiencing important geo-political events from what, at least for me, represent unlikely (if not exotic) locales. Two years ago last month I watched the United States inaugurate its first African American president from behind the barbed wires and concrete bollards protecting my hotel room in Karachi, Pakistan.  Two weeks ago, I watched Egyptians flood into Tahrir square from the lobby of my Riyadh hotel, alongside countless other Arabs, some Saudi, some foreign, all of us sitting transfixed by the Al Jazeera coverage, despite the Kingdom’s official public indifference to developments in the capitol of their Western neighbor.

The reaction within the Kingdom was remarkable for its simultaneous restraint and schadenfreude fascination.  The Saudi Times, the Kingdom’s English language daily and a publication best known for its heavily state-influenced reporting, could not avoid featuring Egypt as its front page, column 1, above the fold news, day after day.  They struggled to find sufficiently noncommittal statements from His Highness King Abdullah, who appropriately spoke strongly in support of the Egyptian people, but stopped short of supporting an overt removal of Mubarak.

The next day, I met with a business partner for lunch and found myself in a candid conversation with a scrupulously gracious and recent Egyptian expat, roughly my contemporary, who in his candid thoughts found himself profoundly worried about events back home. At first I thought his duty to provide Arab hospitality to his visitor perhaps extended to accommodating what he knew to be the view of the US Government: namely that Mubarak, virtual dictator though he was, was relatively preferable to a destabilized and potentially radicalized Egypt. But even Arab hospitality has its philosophical limits, and my colleague showed all the signs of real conviction:  the specter of a state run by the Muslim Brotherhood, overtly hostile to the West, to the minority Egyptian Christian population, and leaning towards extremist isolationism was enough to make my friend lose his appetite.  He began smoking constantly, until his mother called.  From Egypt.  To tell him she was alright.  And then he calmed down a bit–at least for a while.  But he kept smoking.

Now that I’ve left the Kingdom, I can say that the reports on Western news media that “Saudi might be next” or that the unrest in Jordan is but a harbinger of a complete democratization of the region are at once both hopelessly optimistic (speaking of the region as a whole) and naively ignorant of the facts (speaking of the Kingdom in particular).  The Saudi monarchy bears little resemblance to the Mubarak regime: it has developed a broad-based and effective system of wealth distribution that keeps it firmly both in power and on the friendly side of what otherwise become the restless middle class bourgeousie.  It has also struck a 30-year deal with its Wahabbi extremist constituency which keeps it both in power and cloaked in the vestments of religious authority.¹  They have effectively managed diverse constituencies and, even if we know that the average Saudi is restive and possibly susceptible to persuasion by extremists to become terrorists, at the same time the monarchy has paid attention to constituencies and dynamics which Mubarek et al. chose to ignore.  For that reason alone they may receive some flak for infrastructure failures (the virtually annual Jeddah flooding and the virtually annual street protests come to mind), but they remain firmly in power and respected.  And US media theorizing notwithstanding, they show every sign of staying that way for the foreseeable future.

At the same time, Americans and others who see the recent Egypt developments as “a miracle” ought to bear in mind that this triumph of democracy has brought with it an 80 million person power vacuum.  If the Muslim Brotherhood has its way, peace treaties with Israel disappear, the Christian minority becomes a persecuted apostatic underclass, and Egypt flirts with the fate of Afghanistan after the Soviets.  We can–and should–celebrate the removal of a brutal autocrat.  But we should also brace ourselves for a messy destabilization.  If my Egyptian friend is right, most of his 80 million fellow countrymen want I peaceful, nonradical state.  On behalf of one peripatetic and worried American, I profoundly hope he and they get what they want.

1. The relationship between the House of Saud and the Wahabbis in fact stretches back nearly 300 years, but it was the Kingdom’s need for a fatwah “authorizing” their counter-attack on the dissidents who took over the Grand Mosque in 1979 which rolled back the modicum of liberalization seen in the Kingdom during the ’70s and cemented their symbiosis for decades to come. [↩]

By now, you have heard the news.  A gunman opens fire on a public figure in violent repudiation of that public figure’s beliefs.  The public figure is shot.  Extremists mark another victory.  Think I’m writing about the today’s horrific attack in Tucson, Arizona? And happy that the public figure, Rep. Gabrielle Giffords is expected to survive?  I could be.  But sadly this particular public figure, Salmaan Taseer, the Governor of Punjab, Pakistan’s largest province, was not as “lucky” as Rep Giffords.  He died on the spot, having been shot twenty-seven times, murdered because he spoke out loudly against the strict anti-blasphemy laws promulgated by Gen. Zia ul-Haq during his “presidency” (which ended in 1988).

Last year, I traveled Pakistan to speak at a counter-terrorism conference.  I met numerous devout, serious Muslims who decried the senseless violence extremists have brought to their country.  Little did I think that, just a year later, I would be comparing those well-meaning, peaceful Pakistanis with the peaceful, shocked residents of Arizona.  But here we are, a modern first world democracy, confronting the fact that our own internal extremists brook no more dissent than do Pakistan’s and feel no more compunction at shedding the blood of leaders with whom they disagree than do the likes of Mumtaz Qadri (Taseer’s murderer and bodyguard).  In Pakistan, extremists murdered Benazir Bhutto for her  non-extremist beliefs;  in the United States, extremists murdered  Dr. George Tiller for practicing abortion.  Pakistani extremists defy the Koran when they take the lives of other Muslims whose beliefs they do not agree;  American extremists defy their (mostly Christian) beliefs when they take the lives of those whose beliefs they don’t like.

Now we find out that the alleged perpetrator in Arizona is mentally ill.  Does that exonerate him?  Make him any less an extremist?  The vast majority of schizophrenics lead non-violent, if unenviable lives.  Few of them create YouTube channels devoted to anti-government rantings.  So I brand him extreme.  When will we—Americans and Pakistanis alike—act collectively against the overt hostility of our public debate, before it roils itself into outright murder?  We live today in a democracy transmogrified into a killing field, in which those with whom we disagree politically are not only not worthy of our respect, but not worthy of their own lives.  It is already too late to save the first victims.  Will Americans wait until political killing is reaches the heights it has reached in Venezuela, or Pakistan, or Myanmar?

I have spent much of my professional career fighting to end one type of violence: gun violence.  Every day, my work at ShotSpotter helps save lives, solve gun-related crimes, and take criminals off the street who would otherwise keep using guns to destroy lives and communities.  A few years ago, I was fortunate enough to be asked to join the Board of Directors of PAX, our country’s leading non-profit dedicated to reducing youth gun violence.  I thought I was making a difference.  And then I wake up on a day like today, and I read the news from Islamabad, and the news from Tucson, and I realize just how much more difference there is to be made, and how much work we all have before us.

Miguel Helft’s article (“Twins’ Facebook Fight Rages On”) in today’s New York Times recounts the ongoing saga of the lawsuit brought by Tyler and Cameron Winklevoss, the identical twin Harvard graduates who have alleged that Mark Zuckerberg stole the idea for Facebook from them.  Unfortunately, the article also perpetuates a $12 billion misperception.

The news in the article is that the Winklevosses are seeking to unwind their $65 million 2008 settlement with Facebook, a portion of which was paid in Facebook stock.  Their argument is that Facebook’s stock was worth far less than the price they paid for it, and therefore that the settlement was conducted in bad faith and constitutes an act of securities fraud.  Unfortunately, Helft’s article repeats the same error made elsewhere:

But according to court documents, the parties agreed to settle for a sum of $65 million. The Winklevosses then asked whether they could receive part of it in Facebook shares and agreed to a price of $35.90 for each share, based on an investment Microsoft made nearly five months earlier that pegged Facebook’s total value at $15 billion. Under that valuation, they received 1.25 million shares, putting the stock portion of the agreement at $45 million.

Yet days before the settlement, Facebook’s board signed off on an expert’s valuation that put a price of $8.88 on its shares. Facebook did not disclose that valuation, which would have given the shares a worth of $11 million. The ConnectU founders contend that Facebook’s omission was deceptive and amounted to securities fraud. ¹

To anyone who has run a private company with venture or private equity investors, this statement simply doesn’t smell right.  What is missing—but critically important—is mention of what type of shares were being valued in each transaction.

In a typical venture capital-backed company, there are two classes of stock: Common and Preferred, with very different rights and privileges. Common stock, typically held by founders and of which options to purchase are granted to future employees, and Preferred stock, often in several series each with special terms, rights, and conditions (such as the right to earn a dividend on their investment, to get their money out first ahead of the common stock in the event of a liquidity event, the right to appoint board members, and many, many others, including the right to convert each share of preferred stock to some number of shares of common stock in the event of liquidity).  Throughout the world, both public and private companies have different prices for common stock and preferred stock.  (Remember Warren Buffet’s $5 billion investment in Goldman Sachs at the height of the 2008 crisis?  He bought convertible preferred stock at a completely different price than the common stock, in return for a 10% dividend yield, warrants on additional common stock, and other rights he negotiated for.)  Here, for example, are two Citigroup securities, the venerable C, and a preferred variant, Preferred Series I, over the past six months (click the thumbnail to explore on Google Finance):

Two Different Citibank Securities:Two Different Prices!

More often than not, the price of Preferred shares in a venture-backed private company is determined by financing events (e.g., when Microsoft invested $240 million in Facebook in October, 2007).  But pricing events for Common shares are far less, errr, common.  Unless someone explicitly purchases Common (a fairly uncommon event , there simply aren’t pricing events for those shares.  Instead, venture-backed companies generally hire an outside valuation firm to come in an provide a valuation for the common shares given the existence of all of the other preferred shares.  This is important, because private company Common is nearly always last in line for liquidity, often behind literally hundreds of millions of dollars of preferred liquidation preference.  Naturally, such Commons therefore carry a lower price.  It is this lower price that the outside valuation expert provides.  To those in the industry such a price is called a 409(a) Valuation, after the 2004 IRS code section which requires such a valuation to be performed in order for stock options granted at that Common price not to trigger deferred compensation tax liability.  In 2007, IRS issued its final ruling on 409(a), and the 409(a) Valuation process became an annual ritual for all companies which issued stock or options on stock for which a market price was not readily available.

Which brings us to the Winklevoss’s fight with Facebook.  They allege that the 409(a) Valuation performed in early 2008 set a price they should have been offered in their settlement.  As a narrow point, whether this claim is valid or not depends on whether they received Preferred or Common shares as their settlement payment.  There are few details regard, but some sources say they received Common Stock—at the Preferred price.  Such a calculation would give the Winklevosses and their attorneys at least some leg to stand on in their argument.  (The redacted transcript of the hearing is online here, and it makes clear that counsel for the Winklevosses intentionally ignore the difference between Preferred and Common stock valuations.)

But what their claim does not mean is what other news sources have inferred: that the entire value of Facebook was equal to the 409(a) Valuation for the Common Stock times the total number of shares of Common and Preferred outstanding (= $3.7 billion).  Why?  Because doing that math completely ignores the value of the Preferred stock and its rights.  By this same logic, Warren Buffet’s investment in Goldman should have been at the same price as the common stock was trading at that day.  (It wasn’t.)  And every venture Capitalist who spends days negotiating preference rights in a financing is negotiation for something worth  $0. (It isn’t.)  In return for paying higher prices for Preferred shares, investors get board seats, voting privileges (often on behalf of the Common), dividends, and, at least in a startup, often complete control over the company’s balance sheet and stock ledger.

Three things are clear from the court papers:

1. Facebook Preferred stock carried a price of $35.90 in late 2007 when Microsoft invested its $240 million;
2. Facebook’s Board approved a 409(a) valuation of $8.88/share for its Common Stock in early 2008;
3. If the Winklevosses received a number of shares of Common Stock equal to a settlement value ($45 million) divided by the Preferred price, they have something to argue about, but that action itself does not mean that the Preferred and Common had the same value.

The value of Facebook thus did not fall between these two events, as has been variously and mistakenly reported.  Those two prices simply reflect the value of apples and oranges.  The Times mistakes the matter when it reports that “expert’s valuation . . . put a price of $8.88 on its shares,” either intentionally or unintentionally agreeing with the Winklevoss’s attorneys who tried to confuse the matter.  That valuation put a price of $8.88 on its Common shares, not its Preferred shares.  And while the distinction may be a technical one, an entire industry of venture capitalists, private equity, and public investors relies on it every day.  Reporting otherwise doesn’t help the public understand the merits (or lack thereof) of the Winklevoss’s allegations.

1. M. Helft, “Twins’ Facebook Fight Rages On,” Page B1, New York Times, December 31, 2010.  Emphasis added. [↩]

I’ve got a great new investment for you. You’ll love it.  We’re going to bundle up a bunch of bad debt from BBB- borrowers who basically can’t borrow another cent, mix it up with some insurance guarantees, and then present it to Standard & Poor’s and Moody’s.  The rating agencies will give the bonds a AAA rating.  We’re going to do a trillion dollars of this, and the insurers will be perfectly fine insuring all this.  It’s a no-brainer investment.  How much will you give me?

If this sounds like I’m talking about 2008, CDO syndication of sub-prime debt, and AIG and others offering Credit Default Swaps, or CDSs, as derivates used to hedge against CDO losses¹, you have a good memory, but I’m not.  I’m actually talking about the new European Bailout Fund which was much-hyped towards the end of last week. ²  Maybe the EU finance ministers missed the whole 2008 crisis, but even if they did, it’s hard to believe they expect the rest of us to buy their bonds based on the exact same false premises.  Fool me once, shame on you; fool me twice—oh, never mind.  Here’s the problem:

The Irish government needs a bailout.  They can’t borrow at anything but a junk bond rate.  So the EU announces to much fanfare that the big Trillion Dollar Bailout fund will come to the rescue.  But wait, it’s not a fund.  It’s a “facility,” and it doesn’t currently have a single cent in it. ³   Instead, it’s a facility that will issue bonds itself to other investors.  So the Irish debt has a lousy rating, but magically the bonds the Bailout facility issues turn into AAA securities.  How?  Because the remaining EU member states (those not recipient of bailout funds) put their “full faith and credit” behind the facility and guarantee it.  Heard that one before?  Yes, that’s the phrase everyone thought applied to the US government’s support Fanny and Freddie, but didn’t (and that worked out well, didn’t it?), but it’s also directly analogous to the commitment AIG made in the form of its CDSs before the meltdown.  AIG provided derivatives worth trillions of dollars of CDOs without much regard to whether, if those bundles of CDOs eventually defaulted at higher rates than projected, they would have the capital to post as the collateral required to support those CDS policies. ⁴

Here’s why this European facility looks just like the CDS crisis:  the guaranteeing countries guarantee the debts of the bailed out countries.  But some of those guaranteeing countries (Spain, Portugal, Italy, etc.) are already teetering on the brink.  Which means they may default.  And need bailouts themselves, guaranteed by the remaining countries.  The collateral requirement balloons far bigger than the original Irish crisis:  now it includes failures in Spain and Italy and Portugual as derivate problems of the core crisis.  Just as AIG’s derivatives policies forced AIG to post collateral far greater than the underlying CDOs.  So who ends up holding the bag?  AIG—I mean Germany.  For exactly how long do you think the Germans will guarantee the debts of the mismanaged Mediterranean (and Irish) economies?  This isn’t just counterparty risk, it’s political risk.  The future of the EU itself hangs in the balance.  If the Germans pull out, precisely who would guarantee these debts?

Like any other native New Yorker, the theater-going part of me used to dread the announcement that was occasionally heard just as the house lights went down:  “In this evening’s performance, the role of King Lear, normally played by Sir Anthony Hopkins, will be played by Justin Bieber.”  Everybody in the audience groans.  A few leave.  I’m having that same reaction to today’s performance of the European Bailout Fund.  “In today’s performance, the role of the Guarantor usually played by AIG will be played by Germany.”  We all groan.  You can see the bond fund managers leaving for the doors already.  Oh, look, there goes Alliance Bernstein.  And there goes CALPERS.  I wonder whether PIMCO will stay for the second act….

1. There was also straight out insurance against CDO losses, offered by such firms as FSA;  for more details, read Michael Lewis’s excellent The Big Short: Inside the Doomsday Machine [↩]
2. The facility has actually existed since May of this year; last week’s announcement marks the first deployment of the facility.  It becomes a permanent feature of the EU in 2013—if the EU makes it that long! [↩]
3. For a some great background information on the European Bailout facility, listen to Friday’s NPR Planet Money podcast.  I can’t recommend Planet Money enough. [↩]
4. The problem for AIG was not paying out on these insurance policies, since that was the job of FSA and MBIA.  Instead, it was the hugely inflated requirements of AIG to post collateral as a requirement of the CDS agreements which itself was too much for AIG to handle. [↩]

In my business life, I often remind my team of how easy it is for a company to damage a long customer relationship due to a single instance of poor customer service.  Now I have my own story to add to the list:

On Thursday of last week, I flew back to San Francisco from New York.  As a regular American Airlines passenger (150,000 miles flown last year alone; 2.5 million accrued one way or another since 1986), I know the airline well and generally have few, if any complaints.  Even when three of my past five flights have been delayed, I don’t find myself complaining.  It’s a hard business.  Everyone loves to hate airlines, and until last week, I had decided to buck the trend and actually like an airline, if only because it seems to me their business is a tough one and I respect their efforts to run it well. When I got to my office on Thursday after my flight, I discovered I had left my iPad on the plane. Such stupidity is, of course, my fault and not the airline’s. It was a 6:45am flight from JFK, which required my waking up around 3:30am to get to JFK, and jammed as I was into a window seat in coach, I slept fitfully throughout much of the flight. When we arrived in San Francisco, I was thus only too eager to get off. Without my iPad.

But thanks to the wonderful “Find My iPhone” function of Apple’s MobileMe, I quickly established that my iPad was (and still is!) in Terminal 3 at SFO (the American and United terminal), and I could even track where in the building it was in real-time. I called American at the airport, figuring this was an easy problem to solve. The iPad was beeping and displaying my telephone number to anyone who found it, thanks to a message I sent it via Find My iPhone.

Nobody at American Airlines stepped up to help me solve the problem. In fact, the people who have refused to take my call, call me back, or otherwise be in touch are the customer service representatives at SFO.  Here are some details of the folly:

• The first person I spoke to, in baggage services, told me that the recovery of lost items was merely a courtesy. She chastised me for losing my item (reminding me, for example, that an announcement is made “twice, sir, to take your personal items with you” when the plane reaches the gate).  She then hung up on me as I asked her what my other options were to get help.  (Note:  California Penal Code §485 disagrees with her interpretation of her duties.¹  Jason Chen from Gizmodo can attest that the law took Apple’s side when he “recovered” a lost iPhone 4 earlier this year, for example, and Gizmodo realized the law required them to return the item to Apple.)

• The next day, I drove back to the airport and talked to everyone I could.  I showed them the location of my iPad using my mobile phone (yes, it’s an iPhone ).  I sent the missing iPad message after message and “beep signal” after “beep signal.”  Everyone was amazed at the cool technology, and indeed, I have since spoken to many people who are very pleasant.  Some even offer to help.  None of them was a customer service representative, and none took the initiative to “own” the problem and solve it.

• Today (Monday), I had to fly out of SFO on American again, so of course I took the opportunity to walk around the terminal and ask everyone I could about my lost iPad.  I showed lots of people the location of the iPad.  I gave my business card to anyone who would talk to me (even a few who thought I was a nutcase).  Still no phone calls—not even from someone saying they haven’t found it yet, but they’re trying.

By now, I have left voice mail messages for American Airlines Customer Service Managers at SFO several times.  No customer service representative (manager or otherwise) has ever called me.

All the while, I have kept in regular contact with my iPad—via Apple’s Find My iPhone.  It hasn’t run out of battery yet, and it hasn’t moved.  It’s still right there at SFO Terminal 3, beeping away whenever I send it a message.  It displays my name and phone number.  All someone needs to do is look at it and call me.

The experience has left me with one primary question:  after all the voicemails I have left and business cards I have handed out, and given direct evidence that the device is in their facility, why has nobody picked up the phone, called me, and taken the opportunity to turn this into a good customer service experience for a very good customer? (Reminder, I fly about 150,000 miles a year with these people.)   After all, I have made it clear to everyone I have spoken to that I am not blaming the airline—quite the contrary, I’m the idiot who left it on the plane.  But we know where this thing is, and after five days of nobody taking responsibility for returning it to me, the burden of responsibility for a bad experience has shifted.  It is not beyond American Airlines to find a device in their own secure area at their own terminal when that device can be tracked by GPS and made to emit a loud noise whenever their customer tells it to.

All they have to do is call their customer.

update 8/11/2010:  Believe it or not, the iPad still has battery, six days later.  It’s still at SFO, still reporting back to me.  Despite this blog piece, and despite tweets with @AAirWaves and calling endlessly, nobody has yet called me, even to explain that they’re still working on it.

1. The pertinent section of California Penal Code §485 reads: “One who finds lost property under circumstances which give him knowledge of or means of inquiry as to the true owner, and who appropriates such property to his own use, or to the use of another person not entitled thereto, without first making reasonable and just efforts to find the owner and to restore the property to him, is guilty of theft.” [↩]

One of the reasons I value my regular involvement with the Aspen Institute is the opportunity to watch what I occasionally refer to as “leadership cross-fertilization” in action.  Earlier this month, I had the opportunity to watch business pragmatism cross fertilize with public leadership, and it was inspiring.

At a recent Socrates Society event, we were lucky enough to have a Rodel Fellow of the Aspen Institute, Mayor Kasim Reed of Atlanta, who was joined by the innovative schools Chancellor Michelle Rhee (of the DC Public School System), as the evenings panelists.  After an introduction by the President of the Institute, Walter Isaacson, they were interviewed by none other than David Gergen, advisor to four US Presidents, CNN’s senior political analyst, professor at Harvard’s Kennedy School of Government, and a Trustee of the Aspen Institute.  Since my own involvement with the Institute began as a 2001 Crown Fellow of the Institute, I am used to the Institute gathering highly successful leaders and offering them an opportunity to speak candidly.  The Crown program is primarily focused on the rising generation of business leaders. (Indeed, in my 15-person fellowship year alone, everyone was or had been a founder or CEO of a meaningful company.)  But at the time, the Institute did not have a similar program for young political and government leaders.  In 2005, Aspen Institute Trustee and President of the Rodel Foundations, William D. Budinger, and former Congressman Mickey Edwards created the strictly non-partisan Rodel Fellowship to fill precisely that void.

Mayor Kasim Reed of Atlanta (left) and Chancellor Michelle Rhee of the Washington, DC Public Schools System (right). Mayor Reed was a 2007 Rodel Fellow of the Aspen Insitute.

Five years later, it is clear that the Rodel Fellowship picked well:  Mayor Reed, a Rodel Fellow of the Institute, and Chancellor Rhee spoke candidly about the leadership challenges they face.  When asked by David Gergen (who doesn’t know how to ask an easy question) how he handled the structurally unsound pension liability that he faced literally within weeks of stepping into the Atlanta mayor’s office, Mayor Reed provided the evening’s most clear moment of “cross-fertilization.”  He put his CEO hat on and described the meetings he had with union leaders in which he explained the financial realities—just as a CEO must when he must change benefits or even adjust the size of his workforce.  Especially in today’s age of tight budgets and high unemployment, financial pragmatism may not be popular, but it affords a serious public leader a unique opportunity:  to make difficult decisions which result in long-term benefits, even if they attract short-term criticism.

Later, Chancellor Rhee afforded us another glimpse at business pragmatism influencing local government.  Early in her tenure, she was forced to lay off a portion of the teaching force in Washington, D.C.  (She did so again just a few days ago.)  The Chancellor took some heat for performing that layoff not based on seniority but on teacher performance.  Now, as a business leader, I would struggle to justify a layoff based on anything other than performance, even if I did have a unionized workforce, but of course Chancellor Rhee faced a tooth-and-nail fight to do just that.  She found a creative way to fund her system (by raising private corporation donations for community improvement)—predicated on continuing the City continuing to assess teacher performance as part of their retention and reward program (and her continued tenure).  Chancellor Rhee has been the subject of fierce attack for her efforts, but she has persevered, with the help of her boss, Mayor Adrian Fenty.

And then came the final moment of cross-fertilization for the evening:  a classic business leadership technique offered by Mayor Reed as the right public leadership approach to such a circumstance.  Sometimes, he commented, it is necessary for the mayor to “stick his chin out,” and take a punch in order for his subordinates to execute to an aggressive plan.  Business leaders know this one well:  hire people smarter than you, give them both authority and responsibility, then get the hell out of the way—until they need support.  My good friend and former colleague Catherine Ruggles, who at one point had 400 software developers reporting to her at Symantec, used to put it this way:  “take the blame for everything and the credit for nothing.”

Mayor Reed (left) and Institute Trustee David Gergen (right)

I, for one, find it tremendously encouraging to see that kind of leadership pragmatism cross-fertilizing and thus making its way into the next generation of public leaders.  God knows our country needs public officials and leaders who are willing to take a hit or two, remain pragmatic, and push for the changes we need.

Second in a series of posts from Aspen Institute Security Forum, the inaugural—and so far excellent—security and counter-terrorism conference at the Aspen Institute, directed by my friend and colleague Clark Ervin, the former Inspector General of DHS.

The headline on yesterday’s Wall Street Journal read “Iran Arms Syria with Radar [sic]“.  My orthographic quibbles about the proper spelling of RADAR notwithstanding, the article quotes officials who say the new RADAR could pose a security threat to Israel.  No doubt it could.  The point of the article is that this level of military and technology “cooperation” constitutes a serious security threat.  No doubt it does.

Wall Street Journal, from Getty Images

One fact missing from the story was that the Syrians had already spent huge amounts on their air defenses—billions, by some estimates¹.  And as the former US top cybersecurity official, Richard Clarke, points out in his new book, Cyber War: The Next Threat to National Security and What to Do About It, those investments had failed spectacularly.  Clarke those reiterated last night at the Aspen Institute Security Forum that the challenge of cybersecurity lies in the manner in which it levels the playing field in such unexpected ways.  In the case of the briefly infamous 2008 Israeli air raid on the North Korean-designed (and operated?) Syrian nuclear facility, the Syrian RADAR systems appear to have been shut down before a single Israeli shot was fired:  someone (the Israelis, we presume) hacked the Syrian RADAR networks caused them either not to detect the F-15s and F-16s overhead, or not to display them.  (Neither of those aircraft is stealthy;  there is no question the RADARs could have detected them.)  Perhaps the first public acknowledgment of cyberwar in a modern military action followed, as first publicly reported by David A. Fulghum, Robert Wall and Amy Butler (“Israel Shows Electronic Prowess,” in Aviation Week).

So one wonders about this WSJ story:  why are the Syrians buying new RADAR equipment instead of new firewalls and routers?  Well, perhaps they are….

1. Clarke, Richard A. and Robert K. Knake, Cyber War, Harper Collins, 2010 [↩]

Greetings from the Aspen Institute Security Forum, the inaugural—and so far excellent—security and counter-terrorism conference at the Aspen Institute, directed by my friend and colleague Clark Ervin, the former Inspector General of DHS.

The conference is abuzz with the words of Admiral Michael Mullen, Chairman of the Joint Chiefs of Staff, who spoke yesterday and twice raised the topic of terrorist synergies: the joining of forces between previously unrelated and even mutually distrusting terrorist organizations. Having spent the week fighting the fire that was Gen McChrystal’s dismissal and just himself back from a trip to Afghanistan, Pakistan and Israel, it is clear that Adm. Mullen was a man on a mission to identify and address this new phenomenon of terrorist cooperation.

The term and concept are relatively new: there has previously been talk of criminal-terrorist synergies, but in general those reflected local alliances made, if not as a matter of expedience, certainly not with a view towards a global strategy. The trend has existed for a while: as the Hon. Fran Townsend (former Assistant to the President for Homeland Security and Counterterrorism) pointed out today, the trend began early in the Bush Administration: Indonesia’s Jamaat Islamia overtly supporting Al Quaeda; Sudan’s GSPC aligning similarly, etc. But US officials, at least, have taken some comfort in the rifts within Islam and the assumption that, for example, primarly Sunni organizations like Al Quaeda would not join forces with Shiite regimes such as Iran.

Take comfort no longer. There is a palpable sense among officials here that we are now fighting a globally decentralized, cooperating terrorist network which is willing to forego internal idealistic disagreements in favor of the ultimate goal: damaging the West and, specifically, the United States. We have graduated from a multitude of fights against separate entities to a unified fight against global terrorism.